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Right now the stock market looks as if it is beginning to rebound and the number of corporate scandals has at least slowed. From the outside, someone might even say that the stock market looks like a safe place to invest but be careful not to rush in to fast. According to many experts the biggest stock market crash ever may come sometime within the next 10-15 years, and it has everything to do with the law that created the IRA. The Employee Retirement Income Security Act or ERISA was enacted in 1974 to address concern that funds of private pension plans were being mismanaged and abused. Like I mentioned a moment ago ERISA moved the responsibility of retirement saving and investing from the businesses to the workers themselves. When ERISA was passed in 1974, the pension took a back seat to the individual retirement account. One of the provisions of this law says that when IRA holders reach the age of 70 ½ they must begin to take mandatory distributions from their IRAs. This is based on a life expectancy table, the goal of which is to have the average retiree completely drain their retirement savings by the time they pass away.

So the question you should be asking yourself is why does this provision have many stock market and financial analysts sweating? According to an article in Time magazine, titled Everyone, Back in the Labor Pool, every year almost 4 million baby boomers are creeping closer to the mandatory distribution age of 70 ½. This baby boomer population is the largest segment of the American population and also happens to be the wealthiest. As those baby boomers reach 70 ½ and are forced to begin drawing from their retirement funds, more and more money will be leaving the stock market. In fact they’ll be turning 70 ½ at a rate of 10,000 people per day. So this becomes a simple lesson of supply and demand. If there are more buyers than sellers prices go up. For example if 3 people are bidding on an item at the auction the price will most certainly go higher. However if no one is buying, prices start to fall. Within the next 10 years, it is VERY likely that the baby boomers being forced to withdraw money from their retirement accounts will out number the amount of new money entering the market – this could trigger the worst stock market cash we have ever seen. The point is that it’s always a good idea to diversify your investment portfolio. Stocks, businesses, financial paper, and real estate can all be great investments. All of these can be invested in using an IRA, 401k, or other type of retirement account.